The analysis contained in chapter 2 was concerned with securities transfers that are carried out by means of paper documents and applied to listed as well as unlisted securities. In this chapter, securities that are issued without paper certificates and their transfers will be examined, focusing exclusively on listed securities.

Paper documents were, traditionally, used in England to transfer both listed and unlisted securities. This changed when a transfer system was introduced through which transfers of listed securities could be effected by means of electronic instructions. The process whereby paper documents were replaced by electronic instructions is referred to as ‘dematerialisation’.

It is important to stress from the outset that dematerialisation in England developed in a path-dependent manner. To illustrate this, we need first to determine how listed securities used to be transferred prior to dematerialisation (section 3.1). After that, the process which led to dematerialisation will be examined (section 3.2).

Talisman

Until 1996, securities sold the London Stock Exchange were transferred by means of paper certificates and transfer forms. Successive stock exchange rules implemented continuously refined logistical regimes through which the transfer documents where received from the seller, allocated to the buyers and lodged with the issuers.

One example is the system which was in place between 1979 and 1996. This system was known under the acronym ‘Talisman’ which stood for ‘Transfer Accounting, Lodgement for Investors and Stock Management for Market Makers and Dealers’.